1. Technical Field
The subject matter described herein generally relates to operating online lotteries, and specifically to an on-line lottery that excludes ineligible players based on geographic and legal jurisdictions.
2. Background
The operation of lotteries has a long history. In general terms, a lottery involves players purchasing tickets (“lots”) and then prizes being awarded by the drawing of lots. Evidence of lotteries has been found in contemporary texts from many ancient cultures, including the Han Dynasty in China and the Roman Empire. In 1612, King James I of England granted permission for a lottery to be used to help finance the Colony of Virginia, and lotteries were a popular method of raising finances for both the Crown and the Patriots during the Revolutionary War Period. However, by the early 20th Century, lotteries had fallen out of favor in the United States, with state and federal laws making lotteries illegal.
Over the last fifty years, lotteries have reemerged as an alternative to increased taxation for raising revenues. Around two-thirds of the states in the U.S. currently operate some form of statewide lottery, with scratch card games being particularly popular. However, for the most part, under state and federal laws it is generally illegal for private companies to operate lotteries.
One exception is the recent development and popularization of Prize Linked Savings (PLS) systems. The general concept of PLS is to reward people for good financial behavior, such as investing in a savings account or paying down debt. Typically, an individual is rewarded with one entry in a lottery for each unit of pre-determined amount (e.g., $25) put into a savings account (or used to pay down debt). While the Supreme Court has ruled that PLS systems are lotteries, a number of states have passed legislation explicitly authorizing certain financial institutions (e.g., credit unions) to operate PLS lotteries that are open to credit union members who are residents of their respective states.
A key distinction between a PLS lottery and a typical lottery is that in a PLS lottery, players can always get the money they put in back, regardless of whether they win a prize. One consequence of this is that, unlike conventional lotteries, the money put in by players is not available as prize money. Therefore, any prizes offered have to be funded in another manner. Some existing PLS lotteries fund prizes through grants and charitable donations based on the positive effect such systems can have on saving habits, particularly within communities of lesser economic means. However, the availability of such grants and donations is limited and represents a serious obstacle to providing prizes that are large enough to successfully incentivize people to improve their financial habits. The legal restrictions that limit the operation of PLS lotteries to a relatively small number of entities in specific jurisdictions also significantly restricts the viability of PLS lotteries as a wide-spread tool for encouraging good financial habits.